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Growing Chorus Of Dems Agrees: Raising Taxes During Recession A Bad Idea

September 13th, 2010 by MarkTwain · No Comments

As Congress returns from its August recess, a critical issue facing members are the massive tax increases scheduled for next January if Congress does not act to prevent them. Republicans want to prevent those tax increases from going into effect and simultaneously provide employers with some level of certainty so they have a better environment in which to create jobs.

Senate Republican Leader Mitch McConnell wrote in an op-ed for AOL News last week, “In an interview last year, President Barack Obama said that ‘the last thing you want to do is to raise taxes in the middle of a recession’ because it would ‘put businesses in a further hole.’ You don’t hear this often, but I completely agree with the president. Raising taxes in the middle of a recession, particularly on job creators, is a horrible idea. And given those concerns, one immediate way to jump-start the economy would be a firm declaration from the president at his press conference Friday that no Americans, no small businesses will see a tax hike. Period.”

Unfortunately, no such pledge came from the President last Friday. However, a growing chorus of Democrats in Congress seems to agree with Sen. McConnell, with many echoing Obama’s point from a year ago that a recession is the last time to raise taxes. Speaking to a local Chamber of Commerce today, Sen. Joe Lieberman (ID-CT) said, “I don’t think it makes sense to raise any federal taxes during the uncertain economy we are struggling through. The more money we leave in private hands, the quicker our economic recovery will be. And that means I will do everything I can to make sure Congress extends the so-called Bush tax cuts for another year and takes action to prevent the estate tax from rising back to where it was.”

Other Democrats have made similar statements. Sen. Ben Nelson (D-NE) said in a statement last week, “I support extending all of the expiring tax cuts until Nebraska’s and the nation’s economy is in better shape, and perhaps longer, because raising taxes in a weak economy could impair recovery.” Sen. Evan Bayh (D-IN) said, “The economy is very weak right now. Raising taxes will lower consumer demand at a time when we want people putting more money into the economy.”

And Politico reports today, “Red-district Democrats are pressuring Speaker Nancy Pelosi to extend Bush-era income tax rates for all brackets, revealing a high-stakes rift between the party’s vulnerable moderates and its safe liberals as the issue increasingly dominates the national debate. . . . ‘We believe in times of economic recovery it makes good sense to maintain things as they are in the short term, to provide families and businesses the certainty required to plan and make sound budget decisions,’ the House members write in a letter that was being circulated for signatures on Friday and is expected to be delivered today or Tuesday.”

It’s certainly a positive sign that some Democrats are signaling they understand that it would be a terrible idea to raise taxes on Americans in the midst of a painful recession. But tax hikes are problematic for more than the obvious reasons. As The Wall Street Journal writes today, “The uncertainty over looming tax increases is starting to affect both investing and corporate decision-making. The economy remains the biggest factor in many investors’ and businesses’ decisions. But worries over whether Congress will extend some of the expiring Bush-era tax breaks are emerging as another important one. . . . Small-business owners say unease about tax policy, along with the economy, has led them to hold off on hiring and investment.”

If Democrats really want to help the economy, they should join with Republicans to provide some certainty to business owners and ordinary taxpayers and make sure Americans aren’t faced with the largest tax increase in history in January. A growing number of Democrats seem to have reached this conclusion, but the question remains as to whether Democrat leaders, like House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, and President Obama are open to this idea.

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